English uni­ver­si­ties in trouble if fee cap stays on, says He­fce

THE (Times Higher Education) - - NEWS - Rachael.pells@timeshigh­ere­d­u­ca­tion.com

English uni­ver­si­ties can cope with a freeze in tu­ition fees for two years but face “con­se­quences” if fund­ing is not sub­se­quently in­creased, the chief ex­ec­u­tive of the Higher Ed­u­ca­tion Fund­ing Coun­cil for Eng­land has warned.

Ad­dress­ing He­fce’s an­nual meet­ing in Lon­don, Madeleine Atkins de­scribed in­sti­tu­tions’ sur­pluses as a “nar­row gap”. He­fce’s an­nual re­port on the fi­nan­cial health of the sec­tor said that the gov­ern­ment’s de­ci­sion to peg fees at £9,250, rather than in­crease them in line with in­fla­tion, would re­duce uni­ver­si­ties’ in­come by £113 mil­lion in 2018-19, and £333 mil­lion in 2019-20.

The ef­fect of this would be to re­duce av­er­age sec­tor sur­pluses from 2.1 per cent of in­come to 1.8 per cent of in­come in 2018-19, and from 3.4 per cent to 2.4 per cent in 2019-20.

“The sec­tor can cope with this for two years,” Pro­fes­sor Atkins said. “If noth­ing im­proves in that time, there will be con­se­quences.”

He­fce pre­dicts that sec­tor sur­pluses will be low­est this year, 2017-18, av­er­ag­ing 1.3 per cent (£403 mil­lion). How­ever, sev­eral in­sti­tu­tions are pre­dict­ing an­nual deficits, in­clud­ing one ex­pect­ing to make a loss equiv­a­lent to 18.6 per cent of to­tal in­come.

The re­port ex­plains how English uni­ver­si­ties are set to be­come in­creas­ingly re­liant on tu­ition fees paid by in­ter­na­tional stu­dents, which rep­re­sented 25.4 per cent of to­tal fee in­come in 2015-16 but are set to ac­count for 27.7 per cent in 2019-20.

The most se­lec­tive uni­ver­si­ties are most re­liant on for­eign learn­ers, with this in­come stream set to rep­re­sent 39.6 per cent of to­tal fee in­come for high-tar­iff in­sti­tu­tions by the end of the decade.

How­ever, there is again ex­pected to be sig­nif­i­cant vari­a­tion in uni­ver­si­ties’ per­for­mance. While one in­sti­tu­tion is pre­dict­ing that over­seas fee in­come will grow by 241 per cent in the run-up to 2019-20, oth­ers are pre­dict­ing falls of as much as 71 per cent.

High­light­ing risks from in­creased com­pe­ti­tion and de­mo­graphic change in China, Eng­land’s big­gest over­seas stu­dent mar­ket, the fund­ing coun­cil warns that it may still “be a chal­lenge for some in­sti­tu­tions to achieve their pre­dicted growth lev­els”.

Ex­pen­di­ture is also pro­jected to in­crease, re­flect­ing grow­ing staff costs and, for some providers, the like­li­hood of in­creased pen­sion con­tri­bu­tions to the Uni­ver­si­ties Su­per­an­nu­a­tion Scheme, while cap­i­tal spend­ing is also pre­dicted to rise.

As a re­sult, in­sti­tu­tions are pre­dicted to be­come in­creas­ingly re­liant on bor­row­ing. The re­port says that the sec­tor was ex­pected to en­ter a pe­riod of net debt – where bor­row­ing ex­ceeds liq­uid­ity – at the end of 2016-17.

This fig­ure was ex­pected to grow from £577 mil­lion on that date to £5 bil­lion in 2019-20. Again, the most se­lec­tive in­sti­tu­tions are fore­cast­ing the largest net debt, and are pre­dicted to ac­count for more than £4 bil­lion of the to­tal at the end of the decade.

The trend of in­creas­ing bor­row- ing and re­duc­ing liq­uid­ity is “clearly un­sus­tain­able in the long term”, the re­port says.

He­fce con­cludes that the un­cer­tainty from Brexit, in­creas­ing global com­pe­ti­tion, do­mes­tic pol­icy changes and in­creased com­pe­ti­tion will all com­bine to “present chal­lenges” to some in­sti­tu­tions in achiev­ing fi­nan­cial pro­jec­tions.

“This is likely to lead to greater fo­cus from in­vestors on the fi­nan­cial strength of in­di­vid­ual [in­sti­tu­tions],” the re­port says. “Any fall in over­all lev­els of con­fi­dence in the sec­tor could re­strict the avail­abil­ity of fi­nance and put sig­nif­i­cant el­e­ments of the sec­tor’s in­vest­ment pro­gramme at risk.”

‘Nar­row gap’ the sec­tor can cope with re­duced fund­ing caused by the fee cap for two years, but there could be ‘con­se­quences’ if it con­tin­ues, says Madeleine Atkins

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.